Maximise the value of innovation
Support for R&D intensive, loss-making SMEs.
Enhanced R&D Intensive Support (ERIS) offers a higher payable tax credit to support SMEs that are loss-making and heavily invested in innovation. The scheme continues under the SME framework, despite the introduction of a merged R&D scheme for all other businesses.
ERIS was introduced to address the funding challenges many innovative SMEs face, especially in early-stage or pre-revenue phases. By increasing access to cash via a higher credit rate, ERIS aims to protect and reward businesses in sectors like life sciences and deep tech, who may otherwise struggle under reduced SME R&D rates or the merged R&D scheme.
Who qualifies for ERIS?
To be eligible for ERIS, your business must meet all of the following three criteria:
- Be an SME
- Be loss-making in the relevant accounting period
- Meet the R&D intensity threshold
The R&D intensity ratio calculation:
R&D intensity = relevant R&D expenditure / total relevant expenditure.
Your relevant R&D expenditure includes qualifying R&D spend in your claim plus that of any connected companies, and your total relevant expenditure includes trading costs (from the P&L), qualifying pre-trading costs, and adjustments under section 1308 CTA 2009, minus spend with connected companies. This must also include connected parties’ figures.
Thresholds:
- 40% for expenditure incurred on or after 1 April 2023
- 30% for accounting periods beginning on or after 1 April 2024
A one-year grace period applies if a company falls below the threshold, offering consistency in financial planning.
The Enhanced R&D Intensive Support (ERIS) scheme officially came into effect for accounting periods beginning on or after 1 April 2024.
However, eligible companies could claim the associated, higher tax credit rate for expenditure incurred on or after 1 April 2023, under a retrospective provision of the old SME scheme.
The definition of loss-making varies, depending on when the expenditure was incurred:
- For expenditure incurred on or after 1 April 2023: a company is eligible if it has a surrenderable tax loss after applying the R&D enhancement. During this period the 40% intensity threshold applies to loss-making SMEs.
- For accounting periods beginning on or after 1 April 2024: eligibility depends on having a tax loss before any R&D enhancement. During this period the 30% intensity threshold applies to loss-making SMEs.
R&D intensive, loss-making SMEs are eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.
These calculations assumes that the company has £200,000 of qualifying R&D expenditure and a pre R&D tax loss of £500,000.
Total enhanced R&D expenditure £372,000 (£200,000 x 86% = £172,000 plus the original £200,000)
Total tax adjusted loss available to surrender £672,000 (£500,000 loss plus enhanced expenditure of £172,000)
R&D claim is equal to 14.5% of the lower of either a) total enhanced R&D expenditure of £372,000 or b) Total tax adjusted losses available to surrender £672,000. Therefore £372,000 x 14.5% = £53,940
Need support with your R&D claim?
Our specialist innovations team is here to help. We’ll assess your eligibility, guide you through the calculation, and ensure your claim is robust and timely.